Here is what I did to solve 404 problem on Xml-sitemap (version 4 onward) caused by the dynamic sitemap creation.
JUST PASTE THE CODE AS IS ON .htaccess
When you look at the setting of Xml-sitemap closely, it introduces you to add the following code to .htaccess if you have your root directly located on sub-directory. (Link)
RewriteRule ^sitemap(-+([a-zA-Z0-9_-]+))?\.xml(\.gz)?$ /your-blogdir/sitemap$1.xml$2 [L]
The instruction guides to rename "your-blogdir" part of the code to your blog's sub-directory name.
However, don't do this if renaming didn't fix your problem.
Just leave the code as is and copy & paste it to your .htaccess.
And surprise, the dynamic sitemap creation starts working ! (at least for me)
By the way, I didn't do anything on "Override the base URL of the sitemap" setting.I left it blank.
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